Impact of Globalisation on indian Stock Mar ket.

Click

Presented By:Mir Omer toVijaya Master edit Ashish Asha Jyoti Mohsin

subtitle style

6/5/12

GLOBALISATION

6/5/12

GLOBALISATION

Expansion of economic activities across the political boundaries of nation states.

Click to edit Master subtitle style Increasing economic openness and growing economic interdependence between countries.

Opening up of markets to foreign players and vice versa.

6/5/12

Period

Growth Of Expor ts Percent

7.4 10.1 37.5

1980-81 to 1991-92 1992-93 to 1999-00 2000-01 to 2010-11 Good news: Wider markets for trade

Bad news: Reduction in sovereignty Increase in competition may lead to some firms

Larger private capital inflows

Better access to technology

Availability of a wider variety

6/5/12

Why India a part of the Process of Globalisation?

Economic Indicators 1990-1991 Indias Share in World Exports 0.5% 1999-2000 0.6% 0.8% subtitle style 8.5% 12.3 2155 2010-2011 1.3% 2.1% 22% 24.78% 19427

Indias Share into edit Click World Master Imports Indias Exports as percent of GDP Indias Imports as percent of GDP Foreign Direct Investment (million US$)
6/5/12

5.8% 8.8 155

Prior to 1991, India practiced an inward-looking strategy or import substitution policy in order to be self-reliant. Unfortunately this policy, for various reasons could not serve the purpose to:

achieve the expected growth rate eradicate poverty

improve human development indicators like literacy, life expectancy and

the general well being of the people.

6/5/12

India was more of a passive by-stander than an active participant. Reasons for India to liberalise its economy: to be better equipped to improve the performance of theGovernment; to provide opportunities to launch development plans by securing longterm foreign direct investment flows; and expand job opportunities, reduce poverty, create consumers in the market place. Thereby make the circle of economic development virtuous rather than vicious.
6/5/12

Can India avail of the benefits of Globalisation with its present government system / structure?
The answer is no. India needs to bring reforms at the level of governance. With decreased government protection and increased participation in the process of globalisation, the government must provide an enabling environment and infrastructure to get benefits out of the process. For instance: Availability of to edit Master subtitle style quantity and Click electricity at lower prices, in right quality; Good infrastructure facilities such as communications, roads, transport, ports etc; Flexible labour market; Discipline and tightening of bureaucratic setup; and Effective system to guard against corrupt officials.
6/5/12

Globalisation and its impact on Indian Industr y.

6/5/12

Milestones/Events that Have Af fected the Business.

End of World War I End of World War II End of Cold War 9/11

(1918) (1945)

Click to edit Master subtitle style

(1989) (2001)

6/5/12

Globalization & India

India Went Through Economic Reforms From 1991. The major ones are:

Reductions In Import Duty Removal of restrictions on imports Devaluation of Currency

Removal of permissions on setting up enterprises and expansion of capacity

Removal of permission of Controller of Capital on Share Premium Account on issues of Shares

Click to edit Master subtitle style

Privatization of Public Sector Units Membership of WTO Easier entry of multinationals

6/5/12

Indian Financial System.

6/5/12

The Indian Economy -- A Brief Histor y

The second most populated country in the world India currently is the third largest economy India inherited one of the worlds poorest economies

the best formal financial markets in the developing world, with Click to edit Master subtitle style four functioning stock exchanges

a banking system with clear lending norms and recovery procedures;

and better corporate laws than most other erstwhile colonies.

6/5/12

Indian financial sector

The history of Indias stock exchanges (4 at independence to 23 today)

large number of listed firms (over 10,000)

The ratio of Indias market capitalization to GDP rose from about Click to edit to over subtitle style 3.5% in the early 1980sMaster59 % in 2005, which ranks 40th among 106 countries

while the size of the (private) corporate bond market is small

the financial system is dominated by an efficient (low overhead cost) but significantly under-utilized (in terms of lending to nonstate sectors) banking sector.

6/5/12

The financial institutions consist of commercial and co-operative banks,RRBs,AIFIs and NBFCs.

Fall under the ambit of RBI act 1934.

the financial market in india comprises of money market,securities market,FEM, and capital market.

The reserve bank set up the institute for development and research Click to edit Master 1996. in banking techonology (IDRBT) insubtitle style

An autonomous centre for technology capacity building for banks and providing core IT services.

6/5/12

Refor ms

Click to edit Master subtitle style

6/5/12

Pre-Refor ms
Channelling resources from the surplus to deficit sectors.

Banking sector suffered from lack of competition,low capital base,low productivity, and high intermediation cost.

After nationalisation of large banks in 1969 and 1980, govt owned banks dominated the banking sector.

Banks didnt follow proper risk management systems and prudential standards were weak.

Click to edit Master subtitle style

Development financial institutions (DFIs) operated in an over protected environment.

Insurance sector faced little competition.

6/5/12

The mutual fund industry also suffered from lack of competition,and was dominated for long by UTI.

NBFCs grew rapidly but there was no regukation of their asset side.

Barriers to entry.

High transaction costs

Restriction on movement of funds between the market segments. 6/5/12

Post 1991 phase.docx

6/5/12

Privatisation of FIs

Conversion of IFC into public company (IFCI Ltd.).

Private mutual funds were set up under SEBI.

Number of private banks under RBI guidelines.

Setting up of IRDA and enactment of IRDA act 1999.

Establishment of PRDA.

6/5/12

Thus monopoly over financial institutions till early 1990s was dismantled in a phased manner.

Reorganisation of Institutional Str ucture.

1. 2.

Development / Public Financial Institutions:Backbone of IFS till 2000 Addition to financing of industry in the form of project loans , underwriting , lease financing provided core working capital also.

3.

The focus shifted from development finance to that of promoting institutional infrastructure,geared to capital market development. ICICI securities and finance ltd., IFCI financial services ltd., IFCI investors services ltd.

4.

3.

Thus development banks had assumed the character of financial conglomerates in contrast to their earlier role as 6/5/12 lending institutions.

Commercial Banks

Post 90s era of indian banking is characterised by prudential,viable,profitable banking.

Geographically wide and functionally diverse banking system had emerged.

Phenomenal growth in deposits

Increase in the share of priority sector but

6/5/12

Incremental cost of opertion was more than incremental cost of income per rupee of working funds.

Securities/Capital Mar ket

major reforms in primary market:-

Merit based regime to disclosure based regime

Mutual funds are encouraged both in private and public sector

Disclosure and investor protection guidelines issued

Pricing of public issues determined by market

6/5/12

Secondar y Mar ket

Major reforms:-

Mandatory registration of market intermediaries

Capital adequacy norms specified for the brokers.

Shortening of settlement cycle to T+2

Regular inspection of stock exchanges and mutual funds

FIIs 6/5/12 allowed investing in indian capital market since 1992

Money Mar ket

After 1990,a sophisticated and articulate money market emerged

Emergence of specialised institutions namely primary dealers and money market mutual funds.

Activating and modifying the existing procedures

call/notice market

Commercial bills market

6/5/12

SEBI

Protect the interest of investors in securities

Promote the development of securities market

Regulate the securities market

6/5/12

THANK YOU ..
6/5/12